Rural residents can rest assured their utility rates won’t spike in the coming months, following a decision by Gov. Mike Dunleavy not to appeal an Anchorage Superior Court decision ruling funds for the Power Cost Equalization program must be released.
On Friday, Curtis Thayer, executive director for the Alaska Energy Authority, told the Empire payments were going out and the agency would be working with individual communities on potential reimbursements. Thayer said the decision would bring a greater amount of stability to the program.
“I’ve seen the effect this has on rural Alaska, that stability should help,” Thayer said.
In July, the Alaska Federation of Natives and a coalition of tribal governments brought a lawsuit against the state arguing the money should never have been transferred in the first place.
“First off, we’re pleased with the ruling,” said Julie Kitka, president of AFN in an interview. “This program is just vitally important. Energy is a component of modern living, it’s part of life these days. The high cost of energy in rural Alaska really limits opportunities, getting some more equity on that is just good public policy.”
Kitka said the program was set up as an attempt to create equity between rural and urban Alaska. Urban Alaska benefited from an enormous amount of investment and power subsidies to bring their rates down, Kitka said, but the same kind of infrastructure can’t be built in rural Alaska.
She thanked Dunleavy for not appealing the decision and said he called to discuss the matter with AFN before that decision was announced. As to the proposed constitutional amendments regarding the PCE fund, Kitka said AFN puts a lot of credence in rural legislators and typically follows their lead.
The Sweep
Prior to the decision, funding for the program was awaiting release from the state’s Constitutional Budget Reserve which requires a three-quarter vote of the Alaska State Legislature, but the court agreed with AFN. A state accounting mechanism known as the sweep empties certain state accounts at the end of each fiscal year and moves the money to the CBR. In 2019, Dunleavy’s former Attorney General Kevin Clarkson issued an opinion saying the PCE money was also subject to the sweep.
The three-quarter vote for a reverse sweep has traditionally been used by members of the minority as a bargaining chip, but deep divisions at the Capitol this year have already taken lawmakers through two special sessions to get the state’s budget only partially funded.
The next special session is scheduled to start at 2 p.m. Monday, and a bicameral, bipartisan working group has been trying to hash out proposals for resolving the state’s long-term fiscal issues. But some lawmakers are skeptical the group had enough time to draft solid proposals and have asked the call of the special session be expanded to allow for debate on the state accounting mechanism known as the sweep.
The sweep also empties funding accounts for the Alaska Performance Scholarship and the Washington, Wyoming, Alaska, Montana and Idaho program at the University of Washington School of Medicine —the state’s only doctor training program — which many Alaskans rely on. The reverse sweep was for many years a nonissue according to Thayer, but as the state’s savings were drawn down the three-quarter vote became more significant.
[Judge orders release of Power Cost Equalization funds]
The PCE program provides power subsidies to rural communities to bring utility rates in line with those paid in urban Alaska, Thayer said, and without funding rural areas would face higher bills. Communities have 60 days to send their monthly energy reports to the AEA which analyses the reports and distributes funding, Thayer said, so the agency is still seeing reports for months ago for some communities. But some communities had already seen higher bills, Thayer said.
How much someone might see their rates increase depends greatly on the community they’re in, Thayer said, and many of the local utilities use PCE monies to further offset energy rates in the winter. Without that funding, Thayer said it was possible customers could face higher rates in the winter.
Money for the fund currently comes from an endowment fund created specifically for the program, Thayer said. That endowment is currently worth about $1 billion, and is able to pay for the program without additional state funding.
Future of the fund
Lawmakers across the political spectrum have voiced support for PCE and other state programs, but there are differing opinions on how best to manage the fund. When AFN first brought the suit against the state, the governor welcomed the suit and asked the courts for an expedited decision due to the importance of the question.
“My administration welcomed this opportunity to get clarity from the courts,” Dunleavy said Thursday in a statement. “The court did not address an important political challenge: at any point, the PCE fund can be raided by the legislature with a simple majority vote.”
The governor has proposed a constitutional amendment he says will protect the PCE fund, but members of the Legislature have been wary of those proposals. Sen. Bert Stedman, R-Sitka, previously told the Empire he didn’t believe the governor’s proposals provided enough long-term protections. Stedman said funding from the program needed to be protected from year-to-year budget battles.
Some lawmakers have asked the governor to expand the call of the session to include additional items, including the reverse sweep, which would fully fund the state budget.
The workgroup is getting closer to crafting proposals, said Sen. Jesse Kiehl, D-Juneau, one of the group’s members said Friday in an interview, but the work has been challenging. At the end of the last special session members of the Republican House Minority agreed to partially fund the state budget and avoid a partial state government shutdown, but that a vote for a reverse sweep was contingent on resolving the state fiscal deficit. Removing the PCE funding from those negotiations changed the dynamic, Kiehl said, but the reverse sweep is still an important part of the budget.
“There are still other funds that leave holes in the budget if we don’t do the sweep,” Kiehl said.
It is possible the court’s ruling could apply to other swept funds, Kiehl said, including WWAMI and the Alaska Performance Scholarship, but said state attorneys were still reviewing the judge’s decision.
Currently, the call of the next special session is limited to the governor’s constitutional amendments for the Permanent Fund Dividend and a state spending as well as proposals for new revenues. In an interview with Alaska Public Media published Friday, Dunleavy reversed course on his demand that any new taxes be subject to a vote of the people. In May, Dunleavy amended one of his proposed constitutional amendments to include a proposal for protecting the PCE fund.
Energy independence
Keeping the program funded is important, said Jodi Mitchell, CEO of the Inside Passage Electrical Cooperative, the regional utility which administers the PCE program for northern Southeast Alaska, but so is helping rural communities build their own energy projects to keep those costs down permanently.
Without the PCE program one of IPEC’s customers would have paid roughly $332 a month for 500 kilowatt-hours, Mitchell said, but with the program would pay only $158. The PCE program tops out at 500kWh, which Mitchell noted is well below the national average. According to the U.S. Energy Information Administration in 2019 the average American household used an average of 877kWh a month.
”Our people unplug their electronics,” Mitchell told the Empire. “They know how to save energy.”
Mitchell said she wasn’t sure about the Dunleavy’s proposals but had been told by Sen. Lyman Hoffman, D-Bethel, the proposal was a good one. Hoffman, a staunch defender of the PCE program, is currently caucusing with Senate Republicans in an effort to protect the fund. Hoffman was the only Democrat to stand with Dunleavy when he announced the change to his amendment proposal adding the PCE fund.
But Mitchell said she was concerned about lawmakers trying to take money out of the PCE program in the future, and skeptical of Dunleavy’s commitment to protecting the fund.
“If he was really concerned, why did he sweep the funds in the first place?” Mitchell asked. “It seems disingenuous.”
Mitchell said she hoped to see increased funding for renewable energy projects that will allow rural communities to generate their own power. She had been hopeful the infrastructure bill recently passed by the U.S. Senate would provide funding, but Mitchell said the bill didn’t currently provide any funding for new hydropower construction, which is the best option for Southeast Alaska.
Kitka too said she hoped there would be additional funding for rural communities to build and establish their own power generation and energy grids.
“Clearly, we understand that there is an effort to go and modernize energy sources and systems, around the country,” Kitka said. “We want to ensure that our people are part of the modernization.”
• Contact reporter Peter Segall at psegall@juneauempire.com. Follow him on Twitter at @SegallJnuEmpire.
